Is Indian Government scared of competition? Are they supporting offline retailers or trying to make their vote bank happy?
These are some of the questions which are arising, after reports emerged that Indian Govt. may never allow foreign direct investment (FDI) in the B2C segment of Ecommerce.
51% FDI in multi-brand B2B segment is already allowed, along with 100% FDI in single brand retail and 100% FDI in B2B ecommerce portals. But FDI in the much larger B2C segment within the ecommerce niche is the bone of contention as of now.
Last month, we had reported that Commerce and Industry Minister Nirmala Sitharaman has initiated talks with ecommerce players, offline retailers and other stake holders to determine whether FDI should be allowed in the B2C segment or not. Various issues such as taxation, definition of ecommerce, creating a level playing field for local players and inclusion of ecommerce into domestic trade policy were discussed and debated upon.
Now, reports are emerging that the present Govt. wants their much acclaimed and fairly successful ‘Make in India’ vision to succeed on a national level; and if the reports are to be believed, then FDI can cause much trouble in this regard.
A senior official from the Department of Industrial Policy and Promotion (DIPP) said, “B2B (business-to-business) is the best policy. We will just not allow B2C (business-to-consumer). India strongly believes that B2C is against the consumer’s interest. If China and Japan have not opened up, why should we?”
Moreover, the industry has not shown much enthusiasm when it comes to FDI in this segment, as both Flipkart and Snapdeal, along with retailers such as Reliance and Pantaloons group have opposed this step.
On the other hand, CII has said that the Indian B2C market should be only opened after the domestic players have strengthened their position to encounter the onslaught of dollars and pounds.
During the meeting, some representatives of the offline retail shared that once FDI is allowed in B2C segment, the market will flood with cheap products from outside India, which can harm Make in India vision and make us weak against the global players.
Although it is not yet final, as Minister Nirmala Sitharaman hasn’t come out with any official statement, and there are more meetings planned in the coming days to resolve this deadlock.
On one hand Indian Govt. has taken historic decision to allow FDI in Insurance (which will allow influx of Rs 60,000 crore), Indian Railways and other key areas, it is the ecommerce segment which is scaring them the most. The powerful lobby of offline retailers and Indian ecommerce players would, of-course, find it difficult to accept global competitors.
The world is certainly watching the next steps of the Indian Govt., as a decision on the B2C FDI will have a direct result on the overall investments in the country. Maybe its high time that we risk short term failures for the success of long term goals.
The ball is in the Indian Govt.’s court now.
